The link between public support and private r&d effort: what is the optimal subsidy?
The effectiveness of R&D subsidies can vary substantially depending on their characteristics. Specifically, the amount and intensity of such subsidies are crucial issues in the design of public schemes supporting private R&D. Public agencies determine the intensities of R&D subsidies for firms in line with their eligibility criteria, although assessing the effects of R&D projects accurately is far from straightforward. The main aim of this paper is to examine whether there is an optimal intensity for R&D subsidies through an analysis of their impact on private R&D effort. We examine the decisions of a public agency to grant subsidies taking into account not only the characteristics of the firms but also, as few previous studies have done to date, those of the R&D projects. In determining the optimal subsidy we use both parametric and non-parametric techniques. The results show a non-linear relationship between the percentage of subsidy received and the firms’ R&D effort. These results have implications for technology policy, particularly for the design of R&D subsidies that ensure enhanced effectiveness.
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- Xulia Gonz�lez & Jordi Jaumandreu & Consuelo Pazo, 2005.
"Barriers to Innovation and Subsidy Effectiveness,"
RAND Journal of Economics,
The RAND Corporation, vol. 36(4), pages 930-949, Winter.
- Oliver LINTON, .
"Applied nonparametric methods,"
Statistic und Oekonometrie
9312, Humboldt Universitaet Berlin.
- Chang-Yang Lee, 2002. "A simple model of R&D: An extension of the Dorfman-Steiner theorem," Applied Economics Letters, Taylor & Francis Journals, vol. 9(7), pages 449-452.
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